The Innovation-Entrepreneurship NEXUS: A National Assessment of Entrepreneurship and Regional Economic Growth and Development

The U.S. economy churns within an environment fundamentally changed by
technology, global market access and innovation. The structural transformation these
changes bring about challenge regions to align their development strategies with the new
drivers of economic growth.

In today’s increasingly competitive markets, the creation of
economic value can only be sustained as firms, large and small, young and old, increase
their capacity to generate new marketable ideas, rapidly commercialize those ideas and
adjust their competitive offering to changing market conditions. This entrepreneurial
spirit, whether observed in the creation of new or the growth of established firms, keeps
industries vibrant and maintains the health and prosperity of regions.

The Innovation-Entrepreneurship Nexus is comprised of independent and
corporate efforts to assemble and deploy resources for capturing the value in innovative
ideas for new products, services and processes. Importantly, the level of nexus activity in
a region is a strong indicator of the region’s ability to benefit locally from innovation.

Many regions that have made heavy investments in innovation capacity now recognize
that entrepreneurship is the primary mechanism for converting early-stage innovations
into local economic gain. Consequently, regional development leaders are actively
seeking policies and strategies that foster the nexus between innovation and
entrepreneurship for their economic development portfolios.

Early adopter regions are already working proactively to develop an
entrepreneurial-friendly environment that supports all aspects of this process. However,
many others are still focusing their efforts primarily on building the capacity to innovate,
which represents only an early stage of the entrepreneurial process.

Having made
significant investments in innovation capacity with relatively little local economic impact
to show, some regions are just now realizing that commercialization is key to capturing
the economic value embedded in innovation and that the processes for generating
innovations are not the same as those required for their commercialization.

As the results of this assessment will show, innovation without entrepreneurship
generally yields minimal local economic impact. The results demonstrate that
entrepreneurship enhances the regional economic impact of investments in innovation.
Innovations are highly portable, whereas entrepreneurship is place-based.

Whether they
are building new firms or reinventing existing ones, entrepreneurs, through the
application of new ideas to products and services, capture locally the economic benefits
of innovation. Developing strategies, policies and programs for leveraging the nexus
between innovation and entrepreneurship, therefore, appears to be of vital importance to
the competitiveness and vitality of regions.

Though the link between entrepreneurship and economic growth is increasingly
recognized, the purpose of this initiative was to clearly define the role of entrepreneurship
in innovation-driven economies. Furthermore, this assessment examines the level of
entrepreneurship within and across all U.S. regions over time and demonstrates the strong
linkages between entrepreneurial activity and regional economic growth. The analysis is
focused on four fundamental questions challenging today’s regional leaders.

o How much variation is there in the level of entrepreneurship between regions?

o What is the impact of entrepreneurship on regional economic growth and
development?

o Does entrepreneurship activity enhance the benefits of investments in technology
and innovation-based development?

o Why do some regions realize more entrepreneurship activity than others – what
factors drive entrepreneurship activity?

©2004 Advanced Research Technologies, LLC 5

Full Report: http://www.sba.gov/advo/research/rs256tot.pdf